When we talk about infrastructure in India, what should come to our mind first is Indian Railways, but it doesn´t, because we seem to have taken the railways for granted. Indian Railways (IR) has the largest rail network in Asia and the second largest in the world. Despite having a huge network, the productivity of IR does not match up with those of many other countries. While comparing Indian Railways´ network with China´s, that in 1947 had a smaller network than India, it is noticed that China has till date already developed 10,000 kilometres of high-speed rail network. The reasons for this dismal situation are known - which is severe underinvestment. Bad safety record, poor customer service, and delays over the years have led to an erosion of IRs´ share in national freight and passenger traffic. This has in effect, led to slow pace of expansion and modernisation.
What does the future has in store for our railways? While announcing a slew of investments at a recent event in Mumbai, Union Railways Minister Suresh Prabhu said, ¨About $150 billion of investment is required in the rail sector. LIC and Rail infra are the major funding agencies. Further, Rs 8.5 lakh crore is required for connecting the entire country with railways as this is also the most ecologically viable mode of transport.¨ Apart from this, a white paper on Indian Railways released by the ministry in February estimated that projects currently under execution also require Rs two trillion to complete.
The Railways Minister has ambitious plans of expansion and capacity building. However, are we really geared for such a huge spurt of capacity expansion even in the unlikely event that the ministry manages to raise the required finances. Our answer is that this is improbable. Frankly speaking, the Indian Railways does not have capacity and capability of executing large projects on time-bound, expeditious basis. The real challenge is to develop and inculcate strong planning & execution capabilities and a performance-linked work culture. We must also keep in mind that alongside the dire priority of expansion of network and services, there is a need to improve IR´s safety performance, and stop further loss of precious lives through accidents.
So, the rail sector is required to address the twin challenges of safety and capacity. In order to bring the engine of the sector on track, it has to evolve an effective strategy for undertaking massive infrastructure expansion, modernisation, and improve utilisation of existing assets. It is the need-of-the-hour to develop a clear roadmap for implementation of various projects earmarked under PPP. Moving ahead, I will say the time is right for gradual corporatisation of IR in order to bring efficiency and accountability in its operations.
Going further, beyond railways, some of the recent developments in the infrastructure sector are quite promising and interesting. Prime Minister Narendra Modi´s dream project of smart cities has started taking shape and it has achieved a milestone, having received the Union Cabinet´s green signal for Smart Cities Mission and Atal Mission for Rejuvenation and Urban Transformation (AMRUT). As part of this, the Cabinet has also approved Rs 48,000 crore and Rs 50,000 crore over the next five years for the AMRUT project and for the smart cities project respectively. Definitely, this move of the National Democratic Alliance (NDA) Government will eventually bring about a transformation in the country´s urban landscape. Apart from this, the private developers can also explore the emerging opportunities under PPP model. Under AMRUT, apparently the new avatar of the Jawaharlal Nehru National Urban Renewal Mission (JNNURM), the government will execute projects in 500 cities. This is good news indeed.
And finally, to end on a financial sounding note, the Finance Minister Arun Jaitley has exempted units of business trusts in Real Estate Investment Trust (REITs) from Minimum Alternate Tax (MAT). Thus, he has paved the way for alternate ways of financing urban housing & commercial infrastructure projects.